A new
international regime in which financial institutions function as
cross-border tax intermediaries is emerging. The contours of that regime
will be established during a narrow window of opportunity over the span
of the next few years. The resulting regime will have especially
important consequences for emerging countries. A uniform, multilateral
automatic information exchange system would improve both these
jurisdictions’ ability to tax the offshore accounts of their residents
and their capacity to tax certain domestic-source income from capital.

Interestingly,
multinational financial institutions’ and emerging countries’ concerns
with the emerging international regime are largely aligned. As a result,
they may find that they are improbable allies in the battle over taxing
offshore accounts. With the G-20 as an agenda-setter and international
financial law as the model, a governance structure for an automatic
information exchange regime that could be useful to emerging countries’
tax administrations and lower multinational financial institutions’
compliance costs could materialize. The paper explores the necessary
architecture, as well as steps emerging countries may take to help that
architecture develop.